(The accompanying notes
are an integral part of these consolidated financial statements)
(The accompanying notes are an integral part of these consolidated financial statements)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – Basis of Presentation and Organization
Basis of Presentation
The accompanying unaudited interim consolidated financial statements
of SolarWindow Technologies, Inc. and its controlled subsidiary companies (collectively, the “Company”) as of
May 31, 2021, and for the three and nine months ended May 31, 2021 and 2020 have been prepared pursuant to the rules and regulations
of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and do not include
all of the information and note disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”)
for complete financial statements. These Consolidated Financial Statements should therefore be read in conjunction with the Consolidated
Financial Statements and Notes thereto for the fiscal year ended August 31, 2020 included in our Annual Report on Form 10-K
filed with the SEC on November 10, 2020.
The accompanying unaudited interim Consolidated Financial Statements
have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect amounts
reported in the Consolidated Financial Statements and accompanying disclosures. Actual results may differ from those estimates.
The accompanying unaudited interim consolidated financial statements have been prepared on the same basis as the audited financial
statements and include all adjustments (including normal recurring adjustments) that are, in the opinion of management, necessary
for a fair presentation of the Company’s consolidated financial position as of May 31, 2021, results of operations, stockholders’
equity and cash flows for the three and nine months ended May 31, 2021 and 2020. The Company did not record an income tax provision
during the periods presented due to net taxable losses. The results of operations for any interim period are not necessarily indicative
of the results of operations for the entire year.
Organization
SolarWindow Technologies, Inc. was incorporated in the State of
Nevada on May 5, 1998. On August 24, 2020, the Company formed wholly owned SolarWindow Asia (USA) Corp. as the holding company
for SolarWindow Asia Co. Ltd., (collectively “SolarWindow Asia”) a company formed in the Republic of Korea for
the purpose of expansion into the Asian markets. SolarWindow™ technology harvests light energy from the sun and from artificial
light sources, by generating electricity from a transparent coating of organic photovoltaic (“OPV”) solar cells,
applied to glass and plastics, thereby creating a “photovoltaic” effect. The Company’s ticker symbol is WNDW.
Liquidity and Management’s Plan
The Company has not generated any revenue since inception and has
sustained recurring losses and negative cash flows from operations since inception. We expect to incur losses as we continue to
develop and further refine and promote our technologies and potential product applications. As of May 31, 2021, the Company had
$12,876,446 of cash and cash equivalents and short-term investments on hand and working capital of $13,008,360. The Company believes
that it currently has sufficient cash to meet its funding requirements over the next twelve months following the issuance of this
Quarterly Report on Form 10-Q. However, the Company has experienced and continues to experience negative cash flows from operations,
as well as an ongoing requirement for substantial additional capital investment. The Company expects that it may need to raise
additional capital to accomplish its business plan. If additional funding is required, the Company expects to seek to obtain that
funding through financial or strategic investors. There can be no assurance as to the availability or terms upon which such financing
and capital might be available.
NOTE 2 – Summary of Significant Accounting Policies
Information regarding the Company’s significant
accounting policies is contained in Note 2, “Summary of significant accounting policies,” to the consolidated
financial statements in the Company’s Annual Report on Form 10-K for the year ended August 31, 2020.
Presented below and in the following notes is supplemental information that should be read in conjunction with
“Notes to Financial Statements” in the Annual Report.
Fiscal quarter
The Company’s quarterly periods end on November 30, February
28, May 31, and August 31. The Company’s third quarter in fiscal 2021 and 2020 ended on May 31, 2021 and 2020, respectively.
Principles of consolidation
These consolidated financial statements presented are those of SolarWindow
Technologies, Inc. and its wholly owned subsidiaries, SolarWindow Asia (USA) Corp., and SolarWindow Asia Co. Ltd. All significant
intercompany balances and transactions have been eliminated.
The Consolidated Financial Statements above include the results
of operations for SolarWindow Asia from the date of its operations beginning in September 2020. During our fiscal quarter ended
November 30, 2020, the Company made its initial capital infusion of $831,000 to SolarWindow Asia.
Use of estimates
The preparation of consolidated financial statements in conformity
with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and
expenses during the accounting period. The Company considers its accounting policies relating to stock-based compensation
to be the most significant accounting policy that involves management estimates and judgments. The Company has made accounting
estimates based on the facts and circumstances available as of the reporting date. Actual amounts could differ from these estimates,
and such differences could be material.
Cash and Cash Equivalents and Highly Liquid Investments
Cash and cash equivalents include cash on hand and highly liquid
investments with original maturities of three months or less from the date of purchase.
|
|
May 31, 2021
|
|
August 31, 2020
|
Cash and cash equivalents
|
|
$
|
7,876,446
|
|
|
$
|
14,151,523
|
|
Short-term investment
|
|
|
5,000,000
|
|
|
|
-
|
|
|
|
$
|
12,876,446
|
|
|
$
|
14,151,523
|
|
Short-term investments
The Company determines the balance sheet classification of its investments
at the time of purchase and evaluates the classification at each balance sheet date. Money market funds, certificates of deposit,
and time deposits with maturities of greater than three months but no more than twelve months are carried at cost, which
approximates fair value and are recorded in the consolidated balance sheets in short-term investments. As of May 31, 2021, the
short-term investment consists of a fixed-term deposit with a twelve-month maturity at the time of purchase on October 1, 2020.
Recent accounting pronouncements not yet adopted
In December 2019, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes – Simplifying the Accounting for
Income Taxes. The guidance removes certain exceptions for recognizing deferred taxes for equity method investments,
performing intra period allocation, and calculating income taxes in interim periods. The ASU also adds guidance to reduce
complexity in certain areas, including recognizing deferred taxes for goodwill and allocating taxes to members of a
consolidated group, among others. This guidance is effective for interim and annual reporting periods
beginning after December 15, 2020. Early adoption of the standard is permitted, including adoption in interim or annual
periods for which financial statements have not yet been issued. The transition requirements are dependent upon each
amendment within this update and will be applied either prospectively or retrospectively. The adoption of ASU 2019-12 is not
expected to have a material impact on the Company’s consolidated financial position, results of operations, or cash
flows.
Recently adopted accounting pronouncements
The Company reviews new accounting standards as issued. Although
some of these accounting standards issued or effective after the end of the Company’s previous fiscal year may be applicable,
the Company has not identified any standards that the Company believes merit further discussion. The Company believes that none
of the new standards will have a significant impact on the consolidated financial statements.
NOTE 3 – Property and Equipment
Property and equipment consists of the following:
|
|
May 31, 2021
|
|
August 31, 2020
|
|
Increase /
(Decrease)
|
Computers, office equipment and software
|
|
$
|
14,800
|
|
|
$
|
23,709
|
|
|
$
|
(8,909
|
)
|
Furniture and fixtures
|
|
|
19,316
|
|
|
|
12,634
|
|
|
|
6,682
|
|
Equipment
|
|
|
113,820
|
|
|
|
113,820
|
|
|
|
-
|
|
Leasehold improvements
|
|
|
33,604
|
|
|
|
-
|
|
|
|
33,604
|
|
In-process equipment
|
|
|
1,292,655
|
|
|
|
1,292,655
|
|
|
|
-
|
|
Total property and equipment
|
|
|
1,474,195
|
|
|
|
1,442,818
|
|
|
|
31,377
|
|
Accumulated depreciation
|
|
|
(104,404
|
)
|
|
|
(93,323
|
)
|
|
|
(11,081
|
)
|
Property and equipment, net
|
|
$
|
1,369,791
|
|
|
$
|
1,349,495
|
|
|
$
|
20,296
|
|
During the nine months ended May 31, 2021, furniture and fixtures
and leasehold improvements increased $6,682 and $33,604, respectively, due to payments towards SolarWindow Asia office improvements.
As a result of the closure of the Vestal New York office, during
our first fiscal quarter, the Company disposed of office equipment, computers and furniture with an historical cost totaling $21,543
and net book value of $10,936. The Company received $2,161 of proceeds from the sale of the assets resulting in a loss of $8,775.
During the three months ended May 31, 2021 and 2020, the Company
recognized depreciation expense of $9,183 and $5,782, respectively. During the nine months ended May 31, 2021 and 2020, the Company
recognized depreciation expense of $21,637 and $18,684, respectively.
NOTE 4 – Common Stock and Warrants
Common Stock
At May 31, 2021, the Company had 300,000,000 authorized shares of
common stock with a par value of $0.001 per share and 53,196,799 shares outstanding.
2006 Long-Term Incentive Plan
In 2006 the Company’s Board and stockholders adopted and approved
15,000,000 shares for grant under the 2006 Long-Term Incentive Plan (the “2006 Plan”). The 2006 Plan was extended
by the Board on February 7, 2021 to expire two years hence. The 2006 Plan was adopted in order to attract and retain the best available
personnel for positions of substantial authority and to provide additional incentive to employees and directors to promote the
success of the Company’s business. The 2006 Plan provides for the grant of incentive stock options, non-qualified stock options,
restricted stock, restricted stock units, stock appreciation rights, and other types of awards to employees, consultants, and directors.
Stock option grants pursuant to the 2006 Plan vest from zero to five years and expire from six to ten years after the date of grant
with the exercise price equal to the fair value of the underlying stock on the date of grant. All shares approved for grant and
subsequently forfeited are available for future grant. The Company does not repurchase shares to fulfill the requirements of options
that are exercised and therefore issues new shares when options are exercised. There are currently 7,040,527 shares reserved for
issuance under the 2006 Plan, see “NOTE 5 - Stock Options” for additional information.
Warrants
Each of the Company’s warrants outstanding entitles the holder
to purchase one share of the Company’s common stock for each warrant share held. Other than the Series O Warrants and Series
P Warrants, all of the following warrants may be exercised on a cashless basis. A summary of the Company’s warrants outstanding
and exercisable as of May 31, 2021 and August 31, 2020 is as follows:
|
|
Shares of Common Stock Issuable from Warrants Outstanding as of
|
|
Weighted Average
|
|
|
|
|
|
|
May 31,
|
|
August 31,
|
|
Exercise
|
|
Date of
|
|
|
Description
|
|
2021
|
|
2020
|
|
Price
|
|
Issuance
|
|
Expiration
|
Series M
|
|
|
246,000
|
|
|
|
246,000
|
|
|
$
|
2.34
|
|
|
|
December 7, 2015
|
|
|
|
December 31, 2022
|
|
Series N
|
|
|
767,000
|
|
|
|
767,000
|
|
|
$
|
3.38
|
|
|
|
December 31, 2015
|
|
|
|
December 31, 2022
|
|
Series P
|
|
|
213,500
|
|
|
|
213,500
|
|
|
$
|
3.70
|
|
|
|
March 25, 2016
|
|
|
|
December 31, 2022
|
|
Series R
|
|
|
468,750
|
|
|
|
468,750
|
|
|
$
|
4.00
|
|
|
|
June 20, 2016
|
|
|
|
December 31, 2022
|
|
Series S-A
|
|
|
300,000
|
|
|
|
300,000
|
|
|
$
|
2.53
|
|
|
|
July 24, 2017
|
|
|
|
December 31, 2022
|
|
Series S
|
|
|
621,600
|
|
|
|
821,600
|
|
|
$
|
3.42
|
|
|
|
September 29, 2017
|
|
|
|
September 29, 2022
|
|
Series T
|
|
|
16,666,667
|
|
|
|
16,666,667
|
|
|
$
|
1.70
|
|
|
|
November 26, 2018
|
|
|
|
November 26, 2025
|
|
Total
|
|
|
19,283,517
|
|
|
|
19,483,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the nine months ended May 31, 2021, 200,000 Series S Warrants
were exercised for cash resulting in $684,000 of proceeds to the Company.
NOTE 5 - Stock Options
The Company measures share-based compensation cost on the grant
date, based on the fair value of the award, and recognizes the expense on a straight-line basis over the requisite service period
for awards expected to vest. The Company estimated the grant date fair value of stock options using a Black-Scholes valuation model
using the following weighted-average assumptions:
|
|
Nine Months Ended
|
May 31, 2021
|
|
May 31, 2020
|
Expected dividend yield
|
|
–
|
|
–
|
Expected stock price volatility
|
|
89.44%
|
|
82.94 – 86.23%
|
Risk-free interest rate
|
|
0.19%
|
|
1.40 – 1.69%
|
Expected term (in years)(simplified method)
|
|
4.00
|
|
4.5 – 5.75
|
Exercise price
|
|
$3.42
|
|
$2.32 and $3.54
|
Weighted-average grant date fair-value
|
|
$2.16
|
|
$1.61 and $1.55
|
A summary of the Company’s stock option activity for the nine
months ended May 31, 2021 and related information follows:
|
|
Number of Shares Subject to Option Grants
|
|
Weighted
Average
Exercise Price
($)
|
|
Weighted Average Remaining Contractual Term
(Years)
|
|
Aggregate
Intrinsic
Value
($)
|
Outstanding at August 31, 2019
|
|
|
2,777,334
|
|
|
|
4.31
|
|
|
|
|
|
|
|
|
|
Grants
|
|
|
5,158,000
|
|
|
|
4.06
|
|
|
|
|
|
|
|
|
|
Forfeitures and cancellations
|
|
|
(130,600
|
)
|
|
|
3.54
|
|
|
|
|
|
|
|
|
|
Outstanding at August 31, 2020
|
|
|
7,804,734
|
|
|
|
4.16
|
|
|
|
|
|
|
|
|
|
Grants
|
|
|
50,000
|
|
|
|
3.42
|
|
|
|
|
|
|
|
|
|
Exercises
|
|
|
(56,667
|
)
|
|
|
4.95
|
|
|
|
|
|
|
|
|
|
Forfeitures and cancellations
|
|
|
(1,057,667
|
)
|
|
|
5.30
|
|
|
|
|
|
|
|
|
|
Outstanding at May 31, 2021
|
|
|
6,740,400
|
|
|
|
3.97
|
|
|
|
4.55
|
|
|
|
41,277,555
|
|
Exercisable at May 31, 2021
|
|
|
4,003,400
|
|
|
|
3.78
|
|
|
|
5.01
|
|
|
|
25,264,560
|
|
The aggregate intrinsic value in the table above represents the
total pretax intrinsic value for all “in-the-money” options (i.e. the difference between the Company’s closing
stock price on the last trading day of the period covered by this report and the exercise price, multiplied by the number of shares)
that would have been received by the option holders had all in-the-money option holders exercised their vested options on May 31,
2021. The intrinsic value of the option changes based upon the fair market value of the Company’s common stock. Since the
closing stock price was $10.09 on May 31, 2021 and all outstanding options have an exercise price below $10.09 per share, as of
May 31, 2021, there is $41,277,555 and $25,264,560 of intrinsic value in the Company’s outstanding stock options and vested
options, respectively.
Three and Nine Months Ended May 31, 2021
Grants - Pursuant to his appointment to the Board, on October
19, 2020, the Company’s Board granted 50,000 options to Joseph Sierchio, Director, with an exercise price of $3.42, exercisable
on a cashless basis any time prior to the Company’s listing of any of its securities for trading on a national stock exchange,
six-year term and vesting at the rate of 12,500 on the date of grant and 12,500 each anniversary thereafter.
Exercises – upon the exercise of 56,667 stock options
by three individuals between December 18, 2020 and February 23, 2021, the Company received $35,400 and issued 37,476 shares of
restricted common stock. Of the 56,667 options exercised, 10,000 were exercised for cash at an exercise price of $3.54 and 46,667
were exercised on a cashless basis resulting in the issuance of 27,476 shares of restricted common stock.
Forfeitures and cancellations – On December 18, 2020,
Mr. John Conklin and the Company entered into an Amendment to the Separation, Consulting and Release of Claims Agreement dated
November 24, 2020. Pursuant to the Amendment, no further payments are due to Mr. Conklin and all stock options granted under his
employment agreement totaling 1,008,000 were cancelled. In addition, 37,500 unvested options granted to Mr. Conklin on July 5,
2019 were also cancelled. 16,667 options expired and 4,500 options that were previously canceled as a result of an employee reduction
in hours were reinstated due to the continuation of that employee’s services.
Three and Nine Months Ended May 31, 2020
On October 9, 2019, the Company granted 153,000 options to an employee
with a ten-year term, exercise price of $2.32 per share and vesting at the rate of 1/36th per month. Additionally, on September
16, 2019, the Board granted 5,000 options with a six-year term to a consultant with an exercise price of $3.54 per share and vesting
at the rate of 1/20th per quarter.
The following table sets forth the share-based compensation cost
resulting from stock option grants, including those previously granted and vesting over time, that were recorded in the Company’s
Statements of Operations for the three and nine months ended May 31, 2021 and 2020:
|
|
Three Months Ended May 31,
|
|
Nine Months Ended May 31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
SG&A
|
|
$
|
761,654
|
|
|
$
|
172,218
|
|
|
$
|
3,617,132
|
|
|
$
|
516,658
|
|
R&D
|
|
|
141,544
|
|
|
|
262,436
|
|
|
|
588,502
|
|
|
|
773,622
|
|
Total
|
|
$
|
903,198
|
|
|
$
|
434,654
|
|
|
$
|
4,205,634
|
|
|
$
|
1,290,280
|
|
As of May 31, 2021, the Company had $1,401,989 of unrecognized compensation
cost related to unvested stock options which is expected to be recognized over a period of 3.25 years.
The following table summarizes information about stock options outstanding
and exercisable at May 31, 2021:
|
|
|
|
|
Stock Options Outstanding
|
|
|
|
Stock Options Exercisable
|
|
|
Range of
Exercise
Prices
|
|
|
|
Number of Shares
Subject to
Outstanding Options
|
|
|
|
Weighted
Average
Contractual
Life (Years)
|
|
|
|
Weighted
Average
Exercise
Price ($)
|
|
|
|
Number
of Shares Subject
To Options
Exercise
|
|
|
|
Weighted Average
Remaining
Contractual
Life (Years)
|
|
|
|
Weighted
Average
Exercise
Price ($)
|
|
|
2.32
|
|
|
|
153,000
|
|
|
|
8.36
|
|
|
|
2.32
|
|
|
|
80,750
|
|
|
|
8.36
|
|
|
|
2.32
|
|
|
2.60
|
|
|
|
2,500,000
|
|
|
|
5.09
|
|
|
|
2.60
|
|
|
|
1,250,000
|
|
|
|
5.09
|
|
|
|
2.60
|
|
|
3.28
|
|
|
|
7,500
|
|
|
|
5.46
|
|
|
|
3.28
|
|
|
|
7,500
|
|
|
|
5.46
|
|
|
|
3.28
|
|
|
3.42
|
|
|
|
50,000
|
|
|
|
5.39
|
|
|
|
3.42
|
|
|
|
12,500
|
|
|
|
5.39
|
|
|
|
3.42
|
|
|
3.46
|
|
|
|
35,000
|
|
|
|
4.60
|
|
|
|
3.46
|
|
|
|
35,000
|
|
|
|
4.60
|
|
|
|
3.46
|
|
|
3.54
|
|
|
|
1,337,400
|
|
|
|
7.13
|
|
|
|
3.54
|
|
|
|
1,160,150
|
|
|
|
7.58
|
|
|
|
3.54
|
|
|
3.66
|
|
|
|
1,000,000
|
|
|
|
2.25
|
|
|
|
3.66
|
|
|
|
500,000
|
|
|
|
2.25
|
|
|
|
3.66
|
|
|
4.87
|
|
|
|
157,500
|
|
|
|
6.59
|
|
|
|
4.87
|
|
|
|
157,500
|
|
|
|
6.59
|
|
|
|
4.87
|
|
|
6.00
|
|
|
|
800,000
|
|
|
|
2.25
|
|
|
|
6.00
|
|
|
|
800,000
|
|
|
|
2.25
|
|
|
|
6.00
|
|
|
8.00
|
|
|
|
700,000
|
|
|
|
2.25
|
|
|
|
8.00
|
|
|
|
-
|
|
|
|
2.25
|
|
|
|
8.00
|
|
|
Total
|
|
|
|
6,740,400
|
|
|
|
4.55
|
|
|
|
3.97
|
|
|
|
4,003,400
|
|
|
|
5.01
|
|
|
|
3.78
|
|
NOTE 6 – Leases
On February 26, 2021, SolarWindow Asia entered into an apartment
lease for the purposes of housing foreign personnel. The term of the apartment lease provided for a term of one year beginning
March 7, 2021, monthly rent of approximately $950 and a security deposit of approximately $8,700.
In September 2020, SolarWindow Asia entered a lease for office space
in South Korea. The lease has a term of one year from September 23, 2020 through September 23, 2021 with monthly payments of approximately
$1,200 and a security deposit of approximately $14,000.
The Company’s policy is to record all leases with a term of
less than one year as an operating lease with rent expensed recorded on a straight-line basis and to not recognize lease assets
or lease liabilities.
On May 1, 2019, the Company leased office space in Vestal, New York
and entered into a Professional Building Lease Agreement (the “Lease”). The Lease has an initial term of three
years through May 1, 2022 with monthly rent due of $2,200 for the first two years and $2,266 during year three. On November 30,
2020, the Company terminated the Lease and entered into a lease termination agreement (the “Termination Agreement”).
Pursuant to the terms of the Termination Agreement, the Company made a payment of $26,400 and delivered the premises in good order
including the removal of furniture and fixtures which the Company disposed, See “NOTE 3 – Property and Equipment”
for additional information related to the disposal of the furniture and fixtures. All related assets and liabilities were written
off with $418 of unrecognized interest expense charged to rent expense.
As of May 31, 2021, the Company has not entered into any
leases other than those described above which have not yet commenced and would entitle the Company to significant rights or create
additional obligations.
The components of Lease expenses are as follows:
|
|
Three Months Ended May 31,
|
|
Nine Months Ended May 31,
|
|
|
2021
|
|
2020
|
|
2021(a)
|
|
2020
|
Operating lease cost
|
|
$
|
6,672
|
|
|
$
|
6,666
|
|
|
$
|
46,952
|
|
|
$
|
19,998
|
|
(a) Represents three months of rent expense at $2,222
per month, $26,400 lease termination fee, ($418) of unrecognized interest expense and $14,304 related to SolarWindow Asia.
Supplemental balance sheet information related to the Lease is as
follows:
|
|
May 31,
|
|
August 31,
|
|
|
2021
|
|
2020
|
Operating lease right-of-use asset
|
|
$
|
-
|
|
|
$
|
42,212
|
|
|
|
|
|
|
|
|
|
|
Current maturities of operating lease
|
|
$
|
-
|
|
|
$
|
24,828
|
|
Non-current operating lease
|
|
|
-
|
|
|
|
17,736
|
|
Total operating lease liabilities
|
|
$
|
-
|
|
|
$
|
42,564
|
|
|
|
|
|
|
|
|
|
|
Weighted Average remaining lease term (in years):
|
|
|
-
|
|
|
|
1.67
|
|
Discount rate:
|
|
|
-
|
|
|
|
5.85
|
%
|
NOTE 7 - Transactions with Related Persons
A related party with respect to the Company is generally defined
as any person (i) (and, if a natural person, inclusive of his or her immediate family) that holds 10% or more of the Company’s
securities, (ii) that is part of the Company’s management, (iii) that directly or indirectly controls, is controlled by or
is under common control with the Company, or (iv) who can significantly influence the financial and operating decisions of the
Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between
related parties.
On August 7, 2017, the Company appointed Jatinder Bhogal to
the Board of Directors. Mr. Bhogal has provided consulting services to the Company through his wholly owned company, Vector
Asset Management, Inc. (“VAMI”), pursuant to a Consulting Agreement dated February 1, 2014, as amended on
November 11, 2016 and December 1, 2018 (Amendment No. 2) (collectively, the “Prior VAMI Agreements”). On July 1,
2020 the Company and VAMI entered into an Executive Consulting Agreement (the “ECA”), which supersedes the
Consulting Agreements and pursuant to which Mr. Bhogal serves as a director of the Company and as its Chairman and Chief
Executive Officer. Pursuant to the Consulting Agreements in effect prior to December 1, 2018, VAMI received compensation of
$5,000 per month. Beginning with Amendment No. 2, VAMI received compensation of $18,750 per month and pursuant to the ECA,
VAMI receives $34,167 per month. VAMI also incurs expenses on behalf of the Company which are reimbursed according to the
Company’s expense report policy. In connection with the Prior VAMI Agreements and ECA, the Company recognized cash
compensation expense of $102,500 and $56,250 during the three months ended May 31, 2021 and 2020, respectively, and $307,500
and $168,750 during the nine months ended May 31, 2021 and 2020, respectively. As of May 31, 2021, the Company recognized a
related party payable to VAMI of $34,167.
From time-to–time, Talia Jevan Properties, Inc., a British
Columbia corporation wholly-owned by our majority shareholder and former Chairman, Harmel S. Rayat would make interest-free advances
to the Company. Advances received totaled $0 and $120,360 during the three months ended May 31, 2021 and 2020, respectively, and
$0 and $206,718 during the nine months ended May 31, 2021 and 2020, respectively. On March 2, 2020, the Company repaid Talia Jevan
Properties $50,000. On October 20, 2020, the Company repaid Talia Jevan Properties $53,251, the balance owing as of our fiscal
year end August 2020. As of May 31, 2021, there were no balances owing to Talia Jevan Properties, Inc.
Joseph Sierchio, one of the Company’s directors, has maintained
his role as the Company’s General Counsel since its inception as Principal of the law firm of Sierchio & Partners, LLP,
and then as a Partner with Satterlee Stephens LLP and beginning in August 2020, as Principal of Sierchio Law, LLP pursuant to an
engagement letter which provides for an annual fee of $175,000 in exchange for general counsel services. Mr. Sierchio resigned
from the Board effective October 22, 2018, and was reappointed on October 1, 2020. Fees for legal services billed by Sierchio Law,
LLP while Mr. Sierchio was a Director totaled $43,750 and $116,667 during the three and nine months ended May 31, 2021, respectively.
All related party transactions are recorded at the exchange amount
established and agreed to between related parties and are in the normal course of business.
NOTE 8 – Commitments and Contingencies
In September 2020, and February 2021, SolarWindow Asia entered into
leases for office space and an apartment in South Korea. See “Note 6 - Leases” for additional information.
During 2019 the Company made payments totaling $1,292,655 towards
the purchase of manufacturing equipment with an estimated total cost of $1,803,000. The remaining $510,345 will be paid upon the
completion of the equipment once the final specifications have been determined pending optimization of the Company’s product
iteration specific to this equipment.
COVID-19
In December 2019, an outbreak of the COVID-19 virus was reported
in Wuhan, China. On March 11, 2020, the World Health Organization declared the COVID-19 virus a global pandemic and on March 13,
2020, President Donald J. Trump declared the virus a national emergency in the United States. This highly contagious disease has
spread to most of the countries in the world and throughout the United States, creating a serious impact on customers, workforces
and suppliers, disrupting economies and financial markets, and potentially leading to a world-wide economic downturn. It has caused
a disruption of the normal operations of many businesses, including the temporary closure or scale-back of business operations
and/or the imposition of either quarantine or remote work or meeting requirements for employees, either by government order or
on a voluntary basis. The pandemic may adversely affect our operations, our employees and our employee productivity. It may also
impact the ability of our subcontractors, partners, and suppliers to operate and fulfill their contractual obligations, and result
in an increase in costs, delays or disruptions in performance. Our employees are working remotely and using various technologies
to perform their functions. In reaction to the spread of COVID-19 in the United States, many businesses have instituted social
distancing policies, including the closure of offices and worksites and deferring planned business activity. The disruption and
volatility in the global and domestic capital markets may increase the cost of capital and limit our ability to access capital.
Both the health and economic aspects of the COVID-19 virus are highly fluid and the future course of each is uncertain. For these
reasons and other reasons that may come to light if the coronavirus pandemic and associated protective or preventative measures
expand, we may experience a material adverse effect on our business operations, revenues and financial condition; however, its
ultimate impact is highly uncertain and subject to change.
NOTE 9 - Net Income (Loss) Per Share
The computation of basic earnings per share (“EPS”)
is based on the weighted average number of shares that were outstanding during the period, including shares of common stock that
are issuable at the end of the reporting period. The computation of diluted EPS is based on the number of basic weighted-average
shares outstanding plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common
shares outstanding using the treasury stock method. The computation of diluted net income per share does not assume conversion,
exercise or contingent issuance of securities that would have an antidilutive effect on earnings per share. Therefore, when calculating
EPS if the Company experienced a loss, there is no inclusion of dilutive securities as their inclusion in the EPS calculation is
antidilutive. Furthermore, options and warrants will have a dilutive effect under the treasury stock method only when the average
market price of the common stock during the period exceeds the exercise price of the options or warrants (they are in the money).
Following is the computation of basic and diluted net loss per share
for the periods presented:
|
|
Three Months Ended May 31,
|
|
Nine Months Ended May 31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Basic and diluted EPS Computation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss available to common stockholders'
|
|
$
|
(1,806,401
|
)
|
|
$
|
(987,417
|
)
|
|
$
|
(6,492,706
|
)
|
|
$
|
(3,199,393
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
53,196,799
|
|
|
|
52,959,323
|
|
|
|
53,076,883
|
|
|
|
52,959,323
|
|
Basic and diluted EPS Computation
|
|
$
|
(0.03
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.06
|
)
|
The shares listed below were not included in the computation of diluted losses per share because to do so would be antidilutive for the periods presented:
Stock options
|
|
|
6,740,400
|
|
|
|
2,935,334
|
|
|
|
6,740,400
|
|
|
|
2,935,334
|
|
Warrants
|
|
|
19,283,517
|
|
|
|
19,483,517
|
|
|
|
19,283,517
|
|
|
|
19,483,517
|
|
Total shares not included in the computation of diluted loss per share
|
|
|
26,023,917
|
|
|
|
22,418,852
|
|
|
|
26,023,917
|
|
|
|
22,418,852
|
|
NOTE 10 – Subsequent Events
Management has reviewed material events subsequent of the period
ended May 31, 2021 and through the date of filing of financial statements in accordance with FASB ASC 855 “Subsequent Events”.
In managements opinion, no material subsequent events have occurred as of the date of this quarterly report.